Too Much Choice

Bernie Sanders, the (self-described) socialist Senator from Vermont recently quipped in a CNBC interview that “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.” The absurdity of this remark should be self-evident, but for those that think perhaps he has a point I thought it might be instructive to deconstruct the remark so as to reveal the base ignorance of economics and markets that lead to such thinking.

The first flaw is purely a logical one. He engages in what is known as a ‘non-sequitur’ fallacy. A true claim is made (that numerous choices exist in the market) followed by another claim (children are hungry) that supposedly is a causal result of the obviously true condition already stated (too many market choices causes children to be hungry). To more clearly illustrate the absurdity of this remark, let’s modify it slightly while retaining the spirit of his rhetoric: “You don’t necessarily need a choice of 23 types of cereal or of 18 different vegetables when children are hungry in this country.”

Marxist romanticists like Sanders still pine for a past that never was in order to justify a future we should all fear.

This notion of wasteful duplication is unabashed Marxism. It has been thoroughly debunked by over one hundred years of empirical evidence. To make this claim today is tantamount to pondering if perhaps we shouldn’t rethink this whole “earth goes around the sun” thing again. Market based economies that “allow” their citizens to pursue their own independent ends in bringing goods to the market have vastly outpaced centrally controlled command-driven economies (Russia, Cuba, North Korea, former Eastern block countries) in terms of growth, overall standard of living, and reductions in poverty. But Marxist romanticists like Sanders still pine for a past that never was in order to justify a future we should all fear.

Why do some persist in subscribing to this fantasy, that if only a wise overseer could have the final say on economic activity we would have Utopia on earth? Because on an emotional level (that is, non-thinking) it feels superficially plausible. It certainly does seem like a lot of wasteful duplicative effort for many people to all make the same good in slightly different ways and then try to sell that good to the same people. Indeed when companies merge they can become more efficient by eliminating such duplication. What Sanders is actually implying (unwittingly?) is that all businesses ultimately should be merged into a single entity so as to remove all such inefficiencies. Of course this single entity would be run by the state. That hasn’t worked out so well in the past. But hey, maybe this time they’ll get it right.

In reality, we already have a centrally planned economy; every business is individually centrally planned by those running that business. It is also true that any business that directed all employees to perform the exact same task would quickly fail. So if central planning without effort duplication works at the small scale (individual business), why would it not work at the large scale, as Mr. Sanders imagines? Scaling effects and limits on human cognition. A business with 100 employees is more than ten times complex than one with 10 employees. At some point it is simply impossibly for the human mind to manage such a complicated system. We are simply incapable of processing that amount of data and making any sort of useful decisions with it. Indeed that is the biggest challenge for any growing businesses; effective management that ensures all parts runs smoothly and work together as a cohesive whole. It is far easier to manage 5 employees than 5 million. At least in the market if a large business is poorly run (and is not bailed out by the state) losses each year will tell them they are doing something wrong. In a state run economy there is no profit/loss test to tell the state they are doing it wrong; it will just merrily go about walking straight off a cliff

The amazing thing about the market is that all of these smaller parts work together in a cohesive whole without any market level central planning – it’s simply not needed. What some view as wasteful duplication is in fact a discovery process. Bernie might as well complain about all those drug researchers wasting time with experiments that go nowhere. Why don’t they just invent the drug that works from the beginning? The market operates like a science experiment. No one person can know ahead of time what is the best computer, cell phone, deodorant, or toothpaste. Many experiment with variations and then subject those experiments to the market test. A positive result equates with profit and a negative result equates with losses. The system is a self-reinforcing feedback loop that retains what we want and removes what we don’t.

So yes Bernie, we do need those choices. We all have the right both to offer whatever we want to the market and to vote with our dollars on what we will consume from that same market. Seeing as how you are not an omnipotent being, you and the state have no right to restrict those choices in any way.

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